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Representative offices
A representative office of a company is a branch set up on a foreign market for the purpose of carrying out marketing functions, data collection and other activities that do not include the sale of products or the provision of services. A key feature of a representative office is that, by definition, it cannot be involved in transactions, invoicing, or any other form of buying or selling products.
Activities of a representative office
Representative offices are mainly used for two activities that complement the main functions of the company:
Representation of the parent company
Manage information
When representing the parent company, a representative office can conclude contracts on its behalf and communicate with local partners (e.g. organize meetings, send information from the partners to the parent company, etc.).
When managing information, a representative office can conduct market research, organize marketing campaigns and collect data from customers. It also serves as a contact point between the head office and the customer when no other communication channels are available.
In general, a representative office is an opportunity for a company to venture into an unknown foreign market for the first time without taking too much risk. This is because in many jurisdictions setting up a representative office is easier than opening a branch - since representative offices cannot sell products or services, they are often less regulated than other types of companies. Representative offices require fewer resources (logistics networks, specialized sales staff, warehouses) to carry out their main tasks, so that in the event of failure, withdrawing from a particular market is not too costly.
Advantages of a representative office
A representative office has several advantages over other ways of representing a company on a foreign market:
Easier registration and administration
Representative offices cannot conduct business transactions, which is why in many countries they are not as strictly regulated as other companies.
Possibility to open bank accounts
Although representative offices are limited in their functionality, they can still be used to open corporate bank accounts for their parent company in a foreign market.
Easy first market entry
Representative offices are a beneficial solution when the parent company is unsure whether or not to expand into a particular overseas market, as it allows market entry for initial research without building supply chains, customer bases, etc.
Circumvention of Restrictions
In certain jurisdictions, branches and other forms of corporate representation with the ability to conduct transactions are prohibited or subject to certain restrictions. Representative offices are one way to get into the market and get around these restrictions.
http://www.confiduss.com/en/services/incorporation/structure/representative-office/
